Are Busy Boards Effective Monitors?

  • Eliezer M. Fich
  • Anil Shivdasani


Firms with busy boards, those in which a majority of outside directors hold three or more directorships, are associated with weak corporate governance. These firms exhibit lower market-to-book ratios, weaker profitability, and lower sensitivity of CEO turnover to firm performance. Independent but busy boards display CEO turnover-performance sensitivities indistinguishable from those of inside-dominated boards. Departures of busy outside directors generate positive abnormal returns. When directors become busy as a result of acquiring an additional directorship, other companies in which they hold board seats experience negative abnormal returns. Busy outside directors are more likely to depart boards following poor performance.


Corporate Governance Firm Performance Abnormal Return Board Size Independent Board 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The paper benefited from comments by participants at the 2005 American Finance Association meetings, the 2004 Financial Research Association conference, and by seminar participants at Drexel, INSEAD, Seton Hall, North Carolina State, University of North Carolina, and Universidade Catolica de Portugal. The authors thank Anup Agrawal, Stuart Gillan, Bill Greene, Naveen Khanna, Robert Stambaugh, David Yermack, and an anonymous referee for helpful suggestions. The authors acknowledge financial support from the Wachovia Center for Corporate Finance.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Drexel UniversityPhiladelphiaUSA
  2. 2.University of North CarolinaChapel HillUSA

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